China’s Central Bank Denies Plan to Buy U.S. Treasury Bonds

According to a British Broadcasting Corporation (BBC) report, China denied reports that it would buy up to $200 billion worth of U.S. Treasury bonds to partially finance the Bush Administration’s $700 billion rescue package.

Hong Kong’s Ming Pao reported on October 5 that China was going to buy another $200 billion in U.S. Treasury bonds from the financial bailout package, with initial investment fund of $70 to $80 billion.

Bai Li, spokesperson for the People’s Bank of China, said that the central bank has never announced any plan to buy additional U.S. Treasury bonds, according to the Evening Legal.

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Bai also said China and the United States “share common interests” in stabilizing global financial markets and it hopes to see enhanced coordination and cooperation with the States.

On the morning of October 4, following the U.S. Congress approval of the $700 billion bailout for Wall Street, the People’s Bank of China issued a statement welcoming the U.S. package.

The U.S. has issued a total of $2,670 billion in U.S. Treasury bonds. China held $518.7 billion, with 19 percent share, as of the end of July, 2008. China holds the second largest stash of U.S. Treasury bonds.

Zhong Dajun, economist in Beijing, believes that the financial crisis in the States poses a serious threat to the Chinese communist regime. If China invests dollars from its foreign exchange reserves into Wall Street, it will lead to serious lessening of the value of the country’s dollar reserves, and further huge losses to its existing assets.